The Economics of Lost Luggage

Airlines are facing challenges with lost and mishandled luggage, causing significant costs for the industry. In 2022, 26 million bags went missing, reaching a 10-year high. Beyond the direct costs of reimbursement and transporting lost bags, airlines also suffer from the loss of goodwill and potential repeat customers. While airlines have improved their baggage handling over the years, the pandemic-induced staff layoffs led to a surge in mishandled bags. To solve this issue, airlines are hiring more staff and implementing technology like RFID (Radio Frequency Identification) tags for easier and more efficient tracking. Investing in these solutions could save the airlines millions of dollars annually.